The World Is Not Ending...

The title statement has nothing to do with an expected recovery rally, which
has been trying my patience as every time I mention it the Dow drops another
oh... 500 or so points. The title statement just means that even if the worst
fears of investors are realized (and fear is front burner now, think about
it), the system is merely trying to fix itself.

Now, I have been watching a bit more Kudlow, Cramer and Cavuto than usual
(which is usually none), and on balance, I think the tone out there is changing
as expected from 'austerity now!' to 'somebody needs to do something!',
which is code for Keynesian solutions to come, which is code for QE panic by
whatever name they call it this time. Which is dependent on strong T bonds
(check).

In other words, the Keynesians would not solve anything, but simply kick the
problem inside this can down the road some more. Gold's bull is not done, though
the CME boyz and a healthy dose of broad market relief would likely cool down
ole' yeller for a while. Depending on how unhealthy the knee jerked 'investor'
base is, a reaction could feel pretty severe if the stock market gets a strong
relief bid.

The fear has been so palpable and is so striking when juxtaposed against the
still healthy general state of business that I think a serious rally can ignite.
Europe has euro strength over the last year to use in compromising their currency
in the name of plugging the dikes. Here in the US, we have vast herds hiding
in T bonds (I am going to consider shorting the long bond).

In fact, with the depths that markets have dropped to I am allowing more lasting
bullish thoughts (than an anticipated relief rally to the failed neck lines)
to at least enter the discussion. Though, for now I think it is best to just
expect a test of said necklines.

For the Dow chart, that would mean around 12,000. This monthly chart does
not show the H&S top, but it does show a beautiful decline to a visible
support area that just happens to be at a 38% Fib retrace of the entire rally
in hope and inflation out of 2009. The neckline on daily charts comes in at
around 12k or just above.

If the market finds support here at #4, there could be a massive unwinding
of the fear trade. Unfortunately gold, the simple safe harbor that was never
meant to be a play or an instrument of fear, would probably get roughed up
as fear unwinds. By the way, I am not an EW charty, so I have no clue as to
whether there are other qualifications in play that need to validate this 5
wave up scenario. It's probably screwed up, but I know a bull setup when I
see one.

Thinking outside the box, it is possible (though not yet probable) that this
may prove to have been an epic buying opportunity.

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